1958 (11) TMI 19 - HC - VAT and Sales Tax

Summary

Issues:
1. Challenge to levy of sales tax under Madras General Sales Tax Act.
2. Jurisdiction of Civil Courts to entertain suits challenging tax assessments.
3. Validity of assessment under Sales Tax Continuance Order, 1950.

Analysis:
1. The appellant challenged the levy of sales tax under the Madras General Sales Tax Act, contending it was illegal as it taxed sales outside the State of Madras, violating Article 286 of the Constitution. The trial court upheld this contention, but the District judge reversed the decision, stating there was no evidence the goods were not purchased for export. The District judge also raised the issue of maintainability under section 18-A of the General Sales Tax Act, which bars suits to set aside or modify assessments. The appellant appealed this decision, arguing Civil Courts have jurisdiction unless expressly barred. However, section 18-A of the Act excludes Civil Courts from suits challenging assessments made under the Act.

2. The appellant claimed the assessment was illegal and unsustainable, but the court held such challenges cannot be brought before a Civil Court. Citing the decision in Raleigh Investment Co. Ltd. v. Governor-General in Council, it was established that assessments made under the Act are not nullities even if based on a mistake of law. The court emphasized that suits exclusively aimed at setting aside or modifying assessments made under the Act are not maintainable in Civil Courts. The appellant was directed to seek redress under the Act's specific provisions rather than through a Civil Court.

3. The validity of the assessment under the Sales Tax Continuance Order, 1950 was also addressed. The Order allowed taxes lawfully levied before the Constitution's commencement to continue, despite contravening Article 286(2). Previous cases upheld this provision, stating that sales falling within Article 286(2) could be taxed under the Order. The court referred to its prior decisions supporting this interpretation. Consequently, the second appeal challenging the assessment was dismissed, emphasizing the legality of the tax under the Sales Tax Continuance Order, 1950.